Insurance Term Glossary

Let's not let insurance jargon confuse us anymore. Get some helpful and straightforward definitions of some oft perplexing insurance terms.

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Insurance Definitions O - P


OSHA: Occupational Safety and Health Act which establishes and enforces standards and laws for working conditions in commercial and industrial sectors.

Obligee: In bonds this means the person protected by the bond. The obligee under a bond corresponds to the insured under an insurance policy.

Obligor: The person or entity required to perform on a debt or obligation. See principal.

Occupancy: This term refers to the type and character of the use of property in question; business enterprise at that specific location.

Occupational accident: An accident occurring in the course of one's employment and caused by inherent or related hazards.

Occupational disease: Impairment of health caused by continued exposure to conditions inherent in a person's occupation or a disease caused by an employment or resulting from the nature of an employment.

Occupational hazard: A condition in an occupation that increases the peril of accident, sickness or death.

Occurrence: An event that results in an insured loss. Coverage on an "occurrence" basis is generally considered to differ from coverage on an "accident" basis in that "occurrence" connotes gradual or accumulative damage without regard to exact time or place, whereas "accident" refers to instantaneous damage, unidentifiable as to time and place. In other words, "occurrence" may be defined as an event, or repeated exposure to conditions, that results in injury during the policy period.

Other insurance clause: A provision found in most policies stating how a loss will be handled in the event there is other insurance covering the same loss.


Package policies: A combination of coverages marketed as a single policy. Homeowners Multi-Peril and Business owner’s policies are examples of package policies.

Paid-up additions: Additional insurance purchased by participating policy dividends on a net single premium basis. The premium is determined by the insured's attained insurance age at the time additions are purchased.

Paid-up policy: A policy on which no future premiums are due while the company is still liable for the benefits provided under the terms of the contract.

Partial disability: Defined in many accident policies as "the inability to perform one or more important duties of one's occupation."

Partial loss: In property insurance, a loss which does not completely destroy the property or exhaust the applicable insurance.

Payor benefit: A benefit available under certain juvenile policies, upon payment of an extra premium. It provides for the waiver of future premiums in the event the named payor dies or is disabled while the benefit is in effect.

Per capita rule: Under this rule, the death proceeds of a life insurance policy are divided equally among the living primary beneficiaries.

Peril: The specific event causing a loss, such as fire, windstorm or accidental death.

A "named peril" policy covers losses from perils specifically named in the policy.

An "Accidental Direct Physical Loss" (ADPL) policy covers losses from all perils except those it excludes.

Personal injury: Distinguished from "bodily injury," this term relates to injury arising from false arrest, libel, slander, wrongful eviction, etc.

Personal injury protection (PIP): The formal name usually given to no-fault benefits in states that have enacted mandatory or optional no-fault automobile insurance coverages. PIP typically includes benefits for medical expenses, loss of work income, essential services, accidental death and funeral expenses.

Personal lines: Used to refer to insurance for individuals and families, such as private passenger automobile insurance and homeowner policies.

Personal property floater: A policy that covers all of the insured’s property in any location, regardless of where the insured is at the time of loss.

Per Stirpes Rule: Under this rule, the death proceeds of a life insurance policy are divided equally among the named beneficiaries. If a named beneficiary is deceased, his or her share then goes to the living descendants of that individual.

Pilferage: Petty theft, especially theft of articles in less than package lots. In auto insurance this would include the theft of such things as hubcaps, spotlights, spare wheels, etc.

Policy: The written contract effecting insurance, or the certificate thereof, by whatever named called, and including all clauses, riders, endorsements, and papers attached thereto and made a part thereof.

Policy fee: A fee added to the premium to help defray the costs of acquisition and/or maintenance. The fee may be one-time or annual; some policies have no policy fee.

Policyholder: The person in possession of an insurance policy.

Policy owner: The legal owner of a life insurance or annuity policy; may be the insured or annuitant or another party.

Pre-existing condition: A physical or mental condition that existed before issuance of a policy.

Preferred provider organization (PPO): A health care delivery system in which the employer or insurer enters into contracts with health care providers (physicians, hospitals, etc.), to provide health care services at a discount.

Premium: A periodic payment by the insured to the insurance company in exchange for insurance coverage.

Premium notice: Notice of premium due, sent out by the company or one of its agencies, to an insured and/or policy owner.

Primary beneficiary: The party who is usually first entitled to receive the policy proceeds upon the insured's death.

Primary residence: Physical place that serves as the main living quarters, i.e., home or place of residence, as listed on the insurance policy.

Principal: The person, firm or corporation whose performance of certain obligations is covered or guaranteed by a bond.

Principal sum: In a health and accident policy, the amount specified to be paid in the event of covered losses. In a life policy, the amount of insurance provided by the policy at the time of issue.

Proceeds: The net amount of money payable by the insurer at the death of an insured or at the maturity of a policy.

Producer: In insurance, this refers to any person engaged in the production of business, i.e., sales. In most other forms of business, the producer is the manufacturer who turns out the product to be sold.

Product liability insurance: Protection against liability arising out of the handling or use of the existence of any condition in goods or products manufactured, sold, handled or distributed by the insured if the accident occurs after the insured has relinquished possession to others and away from the insured's premises. Coverage also applies to accidents caused by faulty workmanship if the accident occurs away from the insured's premises and after the work has been allegedly completed.

Prohibited risk: A risk which an insurance company will not insure.

Proof of death: A usual requirement before paying a death claim is that a formal statement (proof of death form of some type) be submitted to the insurer.

Proof of loss: A formal statement that the insured typically must furnish before the insurance company will pay any property insurance loss.

Property damage (PD) insurance: Coverage for liability due to damage to the property of others.

Property insurance: Insurance written to cover the loss, by damage or theft, to specified objects of value owned, possessed, or held by the insured. It is sometimes called physical damage in case of automobile insurance.

Pro rata cancellation: A cancellation by the insurer that refunds an amount equal to the daily earned premium multiplied by the days remaining in the policy.

Pro rata distribution clause: A form usually attached to a fire policy covering several buildings. It provides that the insurance shall apply to each building only in the proportion that the value of such building bears to the total value of all buildings covered under the policy.

Proximate cause: The factor causing damage or loss for which there is an unbroken chain of events between the occurrence of an insured peril and the resulting injury or damage.

Punitive damages: Money awarded by a jury as a result of a negligent act, to punish a negligent party and deter others from committing the same act. These damages are over and above compensatory damages.

Pure premium: The amount of premium required to pay losses alone. An amount, usually a percentage, must be added to pay the cost of acquiring and managing the business in order to determine the manual rate.